Business, general

In this article I extend real options theory to technology positioning projects and specify how the relationship between boundary conditions and uncertainty influences the value of a technology option, as well as the appropriate timing of its exercise. I also take a strategic perspective on uncertainty itself, concluding that option value can be amplified by investments to shift boundaries, ideally in ways that are idiosyncratic to the firm. (Reprinted by permission of the publisher.)

The idea of a domain translation that shows how the basic insight of option pricing can be preserved through evolving complementary organization rules is proposed. It is suggested that the negative evolutionary consequences of ignoring option like investments, organizations invent heuristic rules to counter the biases.

Real options as engines of choice and heterogeneity

Article Abstract:

Option value exists when two conditions apply, future choices and potential for proprietary access to outcomes. The primary flexibility created by real options consists of the choice to abandon, a choice that becomes more difficult to make as project stages blur and potential uncertainties within a project interact.